Broker Check

Monday Money Report

| January 30, 2023

Last week the markets were up as good news continued to roll in. Both inflation and consumer spending were down in December[1], spurring hopes that the Federal Reserve will raise rates by a quarter of a percent next week, followed by one additional rate hike in March, before holding steady.

Earnings reports, where publicly-traded companies report their financials for the previous quarter, have been mostly positive. Through Thursday, about 25% of companies had reported, and 69% of those had beaten their estimated earnings.[2] Remember that stocks are priced based on what they are expected to be worth going forward.  If analysts think Spacely Sprockets will earn two dollars a share, the stock is priced to include that value. Which means that if Spacely Sprockets earns more, the stock price would be expected to rise further. If they earn $1.50 a share, while the company is still profitable, they earned less than expected, and their stock price will fall. Currently, the market has priced in expected interest rate hikes, and the probability of a recession, meaning most of the bad news is already built into current stock prices.

I’ve had a large number of conversations lately about out-of-control spending, and most of it is online. The two biggest budget-busters we see are eating out and online shopping. Online shopping is great: it’s fast and easy, and you have access to a wide variety of products without leaving your home or office.  And every time you click “buy”, your brain gets a dopamine hit. Online sites use all sorts of tricks to push you to buy now, appealing to your reflexes rather than thoughtfulness.

Countdown timers are one way they create urgency, saying there are only a few items left, or that your cart is only available for a few minutes. Telling you how many other people have bought an item, or having pop-ups showing an item was just purchased by someone else foster a fear of missing out. Other gimmicks include pushing ratings or reviews, indicating something is a top seller, or that someone in your network has purchased the same item.  These may or may not be true, but they encourage you to buy now.

The number of reviews also impacts purchasing. There is a herd mentality; seeing that thousands of people have purchased an item tells us it’s okay to buy it ourselves. That said, fake reviews continue to be a problem with online sales.

And sales, or discounts, also motivate us to buy.  We all love a good deal, so days like Black Friday, Cyber Monday, and Amazon Prime Day all encourage more spending, even if the so-called sale isn’t really a good deal.

How do you guard against these tricks? One easy way is to remove your credit card information from online shopping sites.  This forces you to step away from the computer to go and get your credit card, giving you time to think about the transaction. Another option is to put items in your cart, but not actually complete the purchase. You’ll get the same dopamine hit from clicking “buy” but you can wait a couple of days to actually complete the purchase, moving you away from all the psychological tricks online stores use to convince you to buy now.

Most of our spending is unconscious. And our human brains don’t like being deprived. We can, however, frame each purchase as a choice.  Yes, I can buy this item on Amazon, or I can put that money towards a vacation.  I can buy this, or I can do something else that I want more. It’s making that conscious choice versus mindlessly clicking “buy”.

Your action item this week is to check your credit report. You can pull one credit report from each of the three agencies at no cost every year. Go to to pick a credit bureau and confirm everything is okay.

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Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor.

All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. 

The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investment(s) may be appropriate for you, contact the appropriate qualified professional prior to making a decision.

[1]Reuters  Wall St crawls higher by Johann M Cherian and Shreyashi Sanyal 01/27/2023

[2] Reuters  Wall St crawls higher by Johann M Cherian and Shreyashi Sanyal 01/27/2023